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Williams v. Curtiss-Wright Corp.

November 29, 1982; As Amended December 6, 1982.



Author: Weis

Before: GIBBONS, WEIS and SLOVITER, Circuit Judges


WEIS, Circuit Judge.

The act of state doctrine requires evaluation whenever adjudication of a controversy might hinder the executive department in the conduct of foreign relations. In this antitrust case, the district court misread one of our opinions as excluding the ministerial acts of a foreign government from the scope of the doctrine. Despite this error, the court correctly refused to invoke the doctrine. Accordingly, we affirm, but on different grounds.

This appeal is one of several arising from James Williams' suit against Curtiss-Wright Corporation alleging antitrust and related state law violations. Here, defendant moved for judgment on the pleadings on the ground that the act of state doctrine makes the case nonjusticiable. The district court denied the motion, which it treated as one for summary judgment, and certified the order to this court under 28 U.S.C. § 1292(b).

The parties are competitors in the sale of surplus J-65 jet engines, parts and accessories to foreign governments. Defendant Curtiss-Wright designed and manufactured the engine, which was originally used by the United States Navy and Air Force in the A-4 Skyhawk aircraft during the conflicts in Korea and Vietnam. The United States Armed Forces no longer use the engines, however, and production has been discontinued. Pursuant to a license issued by the United States, Curtiss-Wright now sells surplus engines, as well as new and reconditioned parts, to the military in Argentina, Singapore, and the Philippines.

Plaintiff James Williams is also in the business of selling J-65 engines and parts to foreign governments. Williams alleges that Curtiss-Wright has monopolized this market in violation of § 2 of the Sherman Antitrust Act, 15 U.S.C. $2, and has engaged in the common law torts of disparagement, unfair competition, and interference with prospective economic advantage. Curtiss-Wright counterclaimed that Williams misappropriated the company's trade secrets on the design and manufacture of J-65 replacement parts.*fn1

Defendant moved to dismiss Williams' amended complaint on the ground that the act of state doctrine prohibits the court from examining the motives of the foreign governments for refusing to purchase J-65 engines and parts from plaintiff. Curtiss-Wright contends that the doctrine in effect bars any proof of a casual connection between its alleged activities and the lost sales claimed as injury by Williams.

The district court found two exceptions to the act of state doctrine articulated in Supreme Court opinions. The first is the so-called Bernstein exception, where the executive branch expressly represents to the court that adjudication would not frustrate the conduct of American Foreign relations. See First National City Bank v. Banco Nacional de Cuba, 406 U.S. 759, 760-770, 32 L. Ed. 2d 466, 92 S. Ct. 1808 (1972) (Rehnquist, J., joined by 2 other Justices). The second arises when the foreign government acts in a commercial rather than a public capacity. See Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 695-706, 48 L. Ed. 2d 301, 96 S. Ct. 1854 (1976) (White, J., joined by 3 other Justices).*fn2

The district court correctly recognized that neither exception applies to the military procurement decisions at issue here. However, it read our opinion in Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287 (3d Cir. 1979), as creating still another exception -- the ministerial acts of a foreign government. On that basis, the district judge denied Curtiss-Wright's motion. The court ruled that the affidavit of a logistics officer in Singapore raised a triable issue of fact as to whether military purchasing decisions in that country are ministerial or discretionary.*fn3

The act of state doctrine is a policy of judicial abstention from inquiry into the validity of an act by a foreign state within its own territory and within the scope of its sovereignty. Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d at 1292. Because the doctrine may be invoked by private litigants, it differs from sovereign immunity, which may be pleaded only by the foreign state itself. RESTATEMENT (SECOND) OF FOREIGN RELATIONS LAW OF THE UNITED STATES § 41, comment e (1965). The doctrine also differs from the defense of governmental compulsion, which is available only when the offending action was mandated by a foreign sovereign. See Interamerican Refining Corp. v. Texaco Maracaibo, Inc., 307 F. Supp. 1291 (D.Del. 1970).

The act of state doctrine once rested on the inherent nature of sovereign authority and principles of international law. Now, in this country at least, the doctrine's foundation has shifted to the interest in preserving the separation of powers between the branches of government. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423, 11 L. Ed. 2d 804, 84 S. Ct. 923 (1964). A court declines to exercise jurisdiction over a case that may hinder or embarrass the executive in the conduct of foreign affairs in deference to the proper distribution of functions between the judicial and the political branches in the area of international relations. Id. at 427-28.

Mannington Mills did not create an exception to the act of state doctrine based on the ministerial-discretionary dichotomy, nor does that opinion differ with the Supreme Court's cases on point. In Mannington Mills, we observed by way of example that the act of state doctrine has traditionally applied to the expropriation of property by foreign governments. In those instances, we explained, "the crucial acts occurred as a result of a considered policy determination by a government to give effect to its political and public interests -- matters that would have significant impact on American foreign relations." 595 F.2d at 1294. In contrast, "the granting of patents ...

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